Otter Tail Power, Pepco, Freeport McMoRan, Cliffs Natural Resources and PACCAR Inc.

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Otter Tail Power (Nasdaq: [ OTTR ]), Pepco (NYSE: [ POM ]), Freeport McMoRan (NYSE: [ FCX ]), Cliffs Natural Resources (NYSE: [ CLF ]) and PACCAR Inc. (Nasdaq: [ PCAR ]).

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Here are highlights from Fridaya�s Analyst Blog:

Higher Production, Better Utilization

When one looks just a bit beyond the headline numbers, the data looks even better than the 0.8% growth implies. For starters keep in mind that these are month to month changes, not annual rates. On a year over year basis, total industrial production is up 5.2%. If the April pace were maintained for a full year, industrial production would be up 10.0%.

More significantly, total industrial production is not just the output of the nationa�s factories, but of its mines and utility power plants as well. Utility output is affected by the weather as much as it is by economic activity.

Utility output fell for the third month in a row, falling 1.3% in April after a 6.1% plunge in March and a 1.7% decline in February. On a year-over-year basis, utility output is down 2.6%. That is probably not good news for electric utilities like Otter Tail Power (Nasdaq: [ OTTR ]) and Pepco (NYSE: [ POM ]).

Just looking at manufacturing gives a better sense of where the economy is going. Manufacturing expanded by 1.0% in April, matching a 1.0% rise in March (revised up from 0.9%). January also saw 0.9% growth, which was also revised up from 0.9%.

In between, though, February saw output decline by 0.1%, and that had previously been estimated at up 0.2%. Year over year, manufacturing output is up 6.0%. However, if the April pace were maintained for a full year, output growth would be 12.7%. If the year-to-date pace can be maintained for the rest of the year, then we are looking at growth of 9.0%. That sort of growth rate almost sounds Chinese, or at least Indian. However, it is mostly due to a bounce off of very low levels last year, not an indication of long-term sustainable growth at anything like that sort of pace.

The third component of Industrial Production, Mining, has been on an absolute tear recently. It showed a 1.4% increase in output in April matching its March increase, which came on top of even stronger numbers in the prior two months. Year over year, output is up 8.5%. However, on an annualized basis, through the first four months of the year it is up 23.9%.

I doubt that sort of growth is going to be sustainable, but it is impressive. Mining companies tend to be highly operationally leveraged, so those sorts of increases are very good news for mining companies with significant operations here -- for example, Freeport McMoRan (NYSE: [ FCX ]) and Cliffs Natural Resources (NYSE: [ CLF ]).

PACCAR: Earnings Scorecard

PACCAR Inc. (Nasdaq: [ PCAR ]) reported its first quarter earnings for 2010 on April 20, 2010, outperforming the Zacks Consensus Estimate by 4 cents per share. The market reacted positively, with share prices rising in the subsequent days.

Analysts were optimistic given the companya�s impressive results and better outlook, as more than half of the analysts covering the stock revised their estimates upward. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for both short-term and the long-term outlook for the stock.

Estimates have improved since the earnings release, implying analystsa� optimism about the stock. The share price movement was favorable as well, suggesting PACCAR is a good stock to own. The company has witnessed top-line growth, its cash flow is healthy and its outlook is enticing. Let's move into the earnings estimate details.

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Otter Tail Power, Pepco, Freeport McMoRan, Cliffs Natural Resources and PACCAR Inc.